Helping The Poorest To Get Poorer; The World Bank and the IMF are
beyond reform. Shut them down

By George Monbiot, Guardian (London),
21 September 2000

A few months ago I used this column to argue that the World Bank was
destroying health and education in the developing world.

In Zambia, for example, the conditions the bank had attached to its
loans—cuts in state spending and the privatisation of
services—had contributed to a 25% increase in infant mortality
since 1980 and, as parents now have to pay to have their children
educated, a disastrous decline in school enrolment.

The bank, oddly enough, didn’t seem to be too happy about my
analysis. It is simply false, Mats Karlsson, one of its
vice-presidents wrote, to claim that the World Bank is further
impoverishing people. It was, he insisted, lending developing
countries more money for health, education and poverty reduction than
ever before.

This is perfectly true. This year, for example, the World Bank will be
handing out some $1.9bn for schools in poor countries. It will also be
destroying schooling worth many times this amount by continuing to
insist that countries put debt repayments ahead of public spending. It
has yet to explain why on earth it is making dollar loans for schools
in the first place, when nearly all their costs are incurred in local
currencies. Only if local provision is to be replaced by foreign
contractors, or if children are to be given computers before they are
taught to read or write, does lending hard currency for basic
education make sense. First they break your legs, then, by way of
compensation, they offer you a pedicure.

At their grand summit in Prague at the end of this week, the World
Bank and the International Monetary Fund will insist, as the
IMF’s former managing director has claimed, that they are now
the best friends of the poor. The bad old days of structural
adjustment—forcing all the countries they deal with to accept
precisely the same neoliberal prescriptions—are over. Instead of
being obliged to accept policies imposed by the first world, debtor
nations will now be allowed to devise their own poverty-reduction
strategies.

This sounds fine, until you discover that, as the World Development
Movement has documented, the recipient countries can request whatever
they want as long as it’s neoliberalism. As one senior bank
official pointed out, the new scheme is a compulsory programme, so
that those with the money can tell those without the money what they
need in order to get the money.

To me, the abiding mystery surrounding the World Bank and the IMF is
why anyone still believes that they are capable of reform. The New
Economics Foundation concludes its devastating critique of the two
bodies by suggesting only that they should undergo democratic
overhauls. Even the Guardian’s usually far-sighted economics
editor, Larry Elliott, has argued that those who believe the World
Bank and IMF are inherently corrupt are not only wrong, but are
giving succour to extremists on the right who oppose all but
minimalist government and despise internationalism. There is, most
commentators agree, no alternative to the existing global financial
system.

This is not a consensus that John Maynard Keynes would have joined. In
1944, he warned that a financial system which imposed penalties and
strictures on debtor nations but not creditor nations would ensure
that the rich became richer and the poor became poorer. He proposed a
global financial institution which would charge interest on both debt
and credit. Creditor nations would thus be encouraged to spend their
surpluses in debtor nations, automatically correcting imbalances in
trade.

The US proposed an alternative system. Help for debtor nations would
be confined to a fund and a bank which lent them money when they got
into trouble. These would both be based in Washington and effectively
controlled by the creditors. As Keynes foresaw, the US proposal would
ensure both that debtor nations fell further into debt and that
creditors—the US in particular—could exercise ever-greater
economic and political power over them. But the US told Britain that
if we didn’t accept its proposal, we wouldn’t get our war
loan.

The World Bank and the IMF, in other words, were conceived as the
policemen for a coercive and grossly unbalanced world order. The idea
that they could deliver anything but disaster for the world’s
poor is laughable. If, as they will claim in Prague, they want to help
build a fairer world, then they must start by closing themselves down.

George Monbiot’s new book, Captive State: the Corporate Takeover
of Britain, is published today by Macmillan